NEW DELHI: Indian stocks plunged more than 3 percent yesterday as the United Progressive Alliance (UPA) government presented an interim budget that doubled the federal deficit while predicting difficult times ahead.
External Affairs Minister Pranab Mukherjee, who is also handling the Finance Ministry, told Parliament that the high deficit was inevitable in view of the slowing of the economy because of the global economic downturn.
The interim budget included spending and revenue estimates for the upcoming fiscal year, which begins April 1, but a new government was to present a full budget and revised figures after assuming office in May. General elections were scheduled to be held in India over a period of several weeks in April and May.
Despite recession in many countries, India was the second fastest growing economy at 7.1 percent and Mukherjee claimed that during the UPA regime the per capita income had increased by 7.4 percent. Planned expenditures for the next fiscal year were pegged at Rs.9.5 trillion ($195 billion) in the interim budget.
The rise in spending means the fiscal deficit would be 6 percent of gross domestic product for this financial year to March 2009 — more than double the government’s target of 2.5 percent and the highest in nearly two decades.
Mukherjee projected next year’s deficit at 5.5 percent.
The 30-share Sensex of the Bombay Stock Exchange closed at 9,305.45, down 3.42 percent.
The broader 50-share S&P CNX Nifty index of the National Stock Exchange ended at 2,948.35, 3.39 percent lower.
— With input from agencies